Maplebear

Instacart delivered strong second-quarter results. Gross transaction value and revenue rose 14%, advertising rose 16%, and adjusted EBITDA rose 19%. Continued customer growth, improving fulfillment, and stronger monetization are encouraging, though competitive risks are unchanged.

Why it matters: Instacart is showing that its scale and grocery data can improve the customer experience and retailer value proposition, supporting engagement and unit economics. However, we see limited evidence that these advantages prevent consumers or retailers from using competing platforms. Fill rates improved for the 16th consecutive quarter, showing that Instacart is getting better at having the right items available, while orders placed through its AI assistant have larger baskets than the $115 average, suggesting that artificial intelligence could support higher customer spending and engagement. Instacart is also embedding itself more deeply with retailers through its Storefront e-commerce platform and by offering fulfillment, advertising, analytics, and AI. These relationships could improve retention and monetization over time, but largely nonexclusive partnerships and ample consumer alternatives continue to limit durable network effects.

The bottom line: We have raised our fair value estimate to $45 per share from $41, primarily to reflect an increase in our medium-term order growth assumption to 6% from 4%. Stronger marketplace execution, advertising scale, and operating leverage improve our growth and margin outlook, but we continue to expect larger competitors to pressure Instacart's market share and long-term returns. We maintain our no-moat rating. Advertising grew 16% and should continue outpacing gross transaction value in the third quarter. Still, management’s revised guidance framework lowers the likelihood of recurring beats, while Amazon’s grocery expansion reinforces competitive pressure from better-capitalized, vertically integrated rivals.

Our fair value estimate for Instacart is $45 per share. The main revenue drivers remain total orders, average order value, the attractiveness of Instacart’s advertising platform, growing acceptance of grocery delivery, network engagement, and the company’s ability to fend off competition from intermediaries and large retailers with their own distribution networks.

We now expect order growth to remain stronger for longer than previously forecast, reflecting continued customer growth and engagement. We forecast orders to increase 10% in 2026, followed by 8% in 2027 and 6% in 2028, before moderating toward low-single-digit growth over the remainder of our explicit forecast. Orders reach about 550 million by 2035, up from 373 million in 2026. This raises our medium-term order growth expectation to the mid-single digits, up from roughly 4%.

Our higher order forecast does not change our long-term competitive thesis. To develop our revenue forecasts, we estimate Instacart’s penetration of the intermediary and overall grocery delivery markets, balancing increasing digital adoption with continued consumer preference for purchasing perishables in stores. We continue to expect Instacart to lose share as Uber, DoorDash, Walmart, and Amazon use their greater scale and broader ecosystems to compete for grocery transactions.

Our estimate for the total grocery market remains $1.65 trillion, with grocery e-commerce at roughly $240 billion today. By 2035, we expect the total grocery market to reach about $2 trillion and grocery e-commerce to approach $400 billion, representing roughly 20% digital penetration. Despite stronger order growth in our near- and medium-term forecasts, we still expect Instacart’s intermediary market share to decline from roughly 58% today toward 50% by 2035.

Our cost assumptions are unchanged. We continue to expect cost of revenue to decline from approximately 28% of net revenue to 26% by 2035 as fulfillment improves and chargeback-related expenses moderate. We also expect sales and marketing costs to remain relatively elevated because of limited network effects, declining only modestly as a percentage of revenue over our forecast.

We don’t believe Instacart has a maintainable competitive advantage. We think customers have numerous viable alternatives and face relatively low costs to switch grocery delivery platforms, which supports our negative outlook that Instacart can create a durable moat.

Instacart is an asset-light internet marketplace. Compared with the gross order value flowing through its marketplace, which serves as a proxy for network strength, its expenses are quite low and mainly consist of payment processing fees, cloud hosting, salaries, and fulfillment insurance. It also generates profitable advertising revenue from consumer packaged goods companies. Additionally, as a multisided network, the company benefits because the cost of adding a user to the network is much lower than the revenue produced. Overall, these strong economics have allowed Instacart to earn returns on capital exceeding its cost of capital in recent years. However, the current trend of declining gross order growth, averaging 24% between 2021 and 2022, then dropping to 6% between 2023 and 2024, and rising competitive pressure raise significant concerns about future excess returns.

If Instacart has a moat, it would come from network effects, since the business operates as a multisided marketplace. Network effects occur when a service's value increases as more users join, making users less likely to switch to competitors. This matters because maintaining network effects requires continuous user growth to increase value and keep users from switching. We believe Instacart benefited from virality and a first-mover advantage in 2020, when competition was limited. However, in our view, this did not create a lasting, durable network effect. Instacart quickly gained consumers, couriers, and grocers, but when competitors DoorDash and Uber entered the market, they quickly began taking share away. We estimate that Instacart’s grocery intermediary market share has decreased from 85% in 2020 to less than 60% today. On a troubling note, Instacart has not updated its monthly active user count since it filed to go public in 2023. All this suggests Instacart never reached critical mass (the point at which network effects become self-perpetuating) and that network growth is slowing.

The virality of Instacart’s service is also more fleeting than that of ride-hailing, because grocery deliveries are less frequent than taking a ride. Uber provides 18 trips per quarter per monthly active consumer. We estimate that Instacart’s frequency is roughly half that. Uber has become part of many riders' routine, while grocery delivery and Instacart have not. We also believe that there is an ingrained preference for visiting a physical marketplace and hand-selecting perishables.

We see evidence that Uber and DoorDash have utilized data—such as geolocation, time, or customer preferences—to enhance their value, particularly by increasing route density, reducing pickup times, and batching orders. For Instacart, we believe grocery customers have fewer time constraints, which limits the benefits of network effects, except for collecting consumer preference data to improve Instacart Ads. Instacart’s focus on a more time-agnostic product (groceries) limits the effectiveness of broad data accumulation. Viral products that grow quickly but do not significantly boost the platform's value to core users (not just advertisers) do not create the virtuous cycle needed for a durable network effect.

The relationships between intermediaries like Instacart, DoorDash, and Uber and grocers like Kroger, Albertsons, and Costco tend to be nonexclusive. This means that a grocer can simultaneously work with all the intermediaries, and it is tough for each intermediary to differentiate itself from the pack of other fulfillment marketplaces. The preponderance of nonexclusivity limits supply-side lock-in to the Instacart distribution network and forces intermediaries to differentiate on price and promotions. This favors the most scaled players with the largest networks, that is, not Instacart.

Instacart not only competes with Uber and DoorDash but also faces rivalry from the two biggest e-commerce and retail platforms, Amazon and Walmart. Walmart has more grocery delivery sales than the entire intermediary market (including Uber, Instacart, and DoorDash) combined. In August 2025, Amazon expanded its same-day delivery of perishables to over 1,000 US cities and towns, with plans to reach 2,300 locations by the end of the year. While Walmart and Amazon differ from intermediaries because they focus solely on moving their own inventory, we believe their enormous scale and strong balance sheets allow them to charge lower service and delivery fees.

The relationship between subscription-based membership fees and delivery fees provides a supporting signal when comparing Instacart with the largest retailers. Instacart charges $99 per year for an Instacart+ membership, which offers free delivery on orders over $10 (although a service fee still applies). Walmart charges $98 per year for Walmart+, and Amazon charges $139 per year for Amazon Prime. In addition to delivery, Walmart provides access to Peacock, Paramount+, gas savings, free pharmacy delivery, and early access to sales events all year, while Amazon offers similar features along with Prime Video. Effectively, Amazon and Walmart have other businesses that can subsidize their delivery costs. Ultimately, we believe consumers are increasingly likely to prefer the deeper value proposition of being locked into either the Walmart or Amazon network, even if it means sacrificing the broad grocer selection from intermediaries.

While we see the threat of new entrants as unlikely in the immediate future, the dual-sided competitive threat from intermediaries and large retailers, the lack of a scale advantage like Amazon and Walmart, weak network stickiness, and concentrated exposure to grocery delivery leave Instacart without a durable moat.

Instacart’s first-mover advantage in grocery delivery has enabled it to build an extensive, multisided network with broad geographic coverage and over 1,800 retail partnerships.

Instacart’s collection of consumer behavior data offers a strong value proposition to brands aiming to advertise at the point of purchase. Instacart’s advertising segment is highly profitable.

We expect younger consumers to be more likely to make grocery purchases digitally, boosting the growth potential of Instacart and other grocery delivery platforms.

The grocery delivery market is highly competitive, and Instacart faces disadvantages in scale, distribution, and diversification compared with Uber, DoorDash, Amazon, and Walmart.

Most retail partnerships between grocers and intermediaries, such as Instacart, are not exclusive, which reduces grocer and consumer switching costs.

Instacart has a relatively concentrated customer base, with over 40% of all gross transaction value coming from its top three retail partnerships. If any of these partnerships are terminated or weakened, it will significantly impact the business.